The Long Term Investor

LOL......I see my "doom and gloom" as simply a short term very "clinical" view of where we are at the moment. Fortunately that view can turn on a dime as events move forward and change.

In reality......I am always POSITIVE.......even if I post negative articles or views at times. If I was not positive about the future I would not be fully invested all the time. I hope you are right about the summer rally TireSmoke.

On the chip GIANTS. I like NVIDIA.......obviously since I own it. I dont own AMD but think they are the next best company in that area. I have no use for INTEL. I think they have not been a good performing company for a long time. I put most of the blame on management. But I dont follow them closely......so....perhaps they are turning around some of their issues.

Back to the topic of 2022........I dont consider it much of an issue if we end the year negative......especially if it is -10% or less. That would just be a NORMAL down year which happens once in a while. What I see as the good news.....is that in my view......the issues we are seeing this year have nothing to do with business or the markets. Most of our issues are being caused by the government and a total lack of leadership at the national level.

 

I do like this little article.

The Low-Down on Q1’s US GDP Downtick
A look beneath the hood at US Q1 GDP and economic developments since.

https://www.fisherinvestments.com/en-us/marketminder/the-lowdown-on-q1s-us-gdp-downtick

(BOLD is my opinion OR what I consider important content)

"Editors’ Note: MarketMinder doesn’t make individual security recommendations. Any stock mentioned herein is merely incidental to the broader topic we aim to highlight.

Thursday morning, the US Bureau of Economic Analysis (BEA) released the advance estimate of US Q1 2022 GDP, which contracted -1.4% annualized. Coming against expectations of 1.1% growth and amid widespread recession fears, this result likely surprises many and may add to widespread recession worries. Yet under the hood, we find little here surprising—or troubling for stocks. Let us show you.

First, consider the details. The pure private-sector GDP components—consumer spending and investment in non-residential structures, equipment, intellectual property and housing—rose and accelerated from Q4 2021, when headline GDP grew 6.9% annualized. (Exhibit 1)

Exhibit 1: Contributions to Growth From Pure Private-Sector Components


Source: BEA, as of 4/28/2022. Q1 2017 – Q1 2022.

How did these broad categories, which total 86.7% of US GDP, accelerate while headline growth contracted?[ii] Simple. Q4 2021’s growth was skewed higher by vast business investment in inventories, which added more than five percentage points to headline growth.[iii] That was likely firms plowing capital into rebuilding inventories and in anticipation of continued supply chain issues. In Q1 2022, that fell off a cliff, with inventory change subtracting -0.84 point, meaning you got more than a six percentage point swing from this one tiny category of the US economy.[iv] A reversal in inventory changes’ contribution shouldn’t surprise—nor is a decline in inventory change necessarily bad. In our view, this should actually quell one rather realistic economic fear we have monitored lately: That firms would over-invest in inventory, only to see demand falter and leave them with excess, driving down pricing. That rather traditional recession recipe doesn’t seem to be materializing in the data after Q1’s release. Rather, it looks like strong demand ran down stockpiles a bit.

Beyond inventories, government spending also fell -2.7% annualized, detracting -0.48 point from headline growth, largely because some pandemic-related relief spending dried up.[v] But this, too, shouldn’t shock. Such measures were always going to end and, like inventory change, one can debate whether a bigger or smaller contribution from government consumption is economically good or bad. And, the other unsurprising piece: While consumer spending overall grew 2.7% annualized, adding 1.83 points to headline growth, goods spending was flat while services boomed 4.1% higher.[vi] Note that these figures are inflation-adjusted—not boosted artificially by high prices.

This pattern, which we have long expected tied to lifting COVID restrictions and pent-up demand for things like travel, echoes corporate executives’ commentary and data from conference calls. In the last two days, payment technology firms Visa and Mastercard both reported resurgent overseas transaction volumes, suggesting travel is making a comeback. In its filing Tuesday, Google’s parent company Alphabet reported search volumes related to travel are also up.

You can see this goods-versus-services flip flop in Exhibit 2, which plots the cumulative contribution to growth from services and goods spending over the past five years. As shown, services spending—even now almost twice as large as goods spending—absolutely tanked in the pandemic while goods consumption soared after a brief blip. This likely pulled some goods demand forward, which may explain the slow growth now, while services spending advances.

Exhibit 2: Services Versus Goods Spending


Source: BEA, as of 4/28/2022. Cumulative contributions to growth, Q1 2017 – Q1 2022.

Lastly, imports vastly outweighed exports. Imports are subtracted from headline GDP, a means to offset their inclusion in other categories, like spending, and thereby give a better read of one nation’s economic activity.

Beyond this, we think it may also be worth recalling that Q1 GDP data have a more than 40-year history of downward skew, tied to issues with seasonal adjustment—issues that have grown rather than shrunk in recent years.[vii] (Seasonal adjustment is an econometric modeling approach that aims to smooth out repeat, calendar-related impacts on growth, like the typical holiday-related spending surge in Q4, following by a crash in Q1). This is a well-documented phenomenon in the economics community, which the BEA has attempted to identify and fix more than once.[viii] Now, perhaps they have fixed the adjustment, but we doubt it. Pandemic-related skew has wreaked havoc on seasonal adjustment factors used in an array of series from jobless claims to GDP and more. This doesn’t fully erase the contraction, of course. But we think it should be a cautionary tale for those drawing huge, forward-looking conclusions from it.

Of course, Q1 ended 28 days ago, so one may wonder what the economy’s state is since. We don’t have many formal data points to rely on just yet, beyond preliminary purchasing managers’ indexes—surveys tallying the breadth of growth across the economy—which point to fairly healthy US economic activity. These gauges don’t tell you anything about the magnitude of growth, though—just its breadth. But if you look to less-traditional measures of activity, you can see some signs of expansion continuing. Take, for example, these:

• Restaurant reservation service OpenTable’s data show seated diners at US restaurants spent most of this month hovering around April 2019 levels, continuing a recovery to pre-pandemic levels of activity.[ix]
• Through April’s first 27 days, the Transportation Security Administration reports 57,025,545 passengers have passed through security at America’s airports—53.4% above the comparable period last year and just -9.6% below 2019 levels.[x]
• In the week of April 17 – 23, US hotel occupancy was at 65.8%, down just -4.2% from 2019’s pre-pandemic period. That is despite average daily hotel rates rising 15.4% over this span.[xi]
• Goods shipping via train is a little soft, according to the American Association of Railroads, averaging -4.8% y/y in April’s four weekly reports to date. But that would seemingly echo the services-versus-goods split above all else.[xii]
• Meanwhile, in the Energy sector, April 22’s Baker Hughes tally of US rigs actively drilling for oil and gas rose 59% y/y.[xiii]

Now, take these data with a grain of salt. They are limited. They aren’t seasonally adjusted and base effects could skew them. But they don’t really suggest economic activity has fallen off a cliff this month. We would suggest that, in concert with corporate executives’ recent commentary, the preponderance of the evidence suggests Q1 GDP’s small contraction isn’t a harbinger of bigger trouble ahead. That is doubly true when you consider the US Leading Economic Index rose 0.3% m/m in March and 0.6% in February, extending an uptrend.[xiv] That suggests to us a recession isn’t likely in the offing now.

It wouldn’t surprise us if Q1’s contraction served a different purpose: Allowing bearish pundits to see their concerns as validated—and move on. That is rather typical correction behavior, and it can be key to sentiment morphing. Only time will tell if that holds now, but we suspect it may partly explain why stocks surged after the data dropped."

MY COMMENT

I tend to agree with most of the above. I dont think the economy was as bad as the GDP number indicated. In fact consumers are spending like crazy.

I do think that we........"could"........not "will"...... see another 5-10% drop in the markets this year with all the volatility that seems to be disconnected from actual business fundamentals. At that point I think we would be at the bottom.

Of course to me......it does not matter since I simply stay fully invested all the time. When the market turns positive again and starts to move up.....I will be in it from day one. AND.....you never know when that is going to happen. that is why market timing does not work. It is impossible to predict the market moves.....especially the BIG EXPLOSIVE moves UP. If you miss out on those early BIG moves up as a market turns from negative to positive.....you will severely under-perform the averages over the long term.

 

The markets today remind me of yesterday. Bouncing around from positive to negative and back to positive.....trying to figure out what to do.

Looks like the FED has been knocked out of the news at the moment. No doubt they are going to raise rates this week........and......everyone knows it. So......it is a non-event.

 

Part of our issues right now is the fact that we are STILL struggling to recover from the economic shut-down. Especially the labor markets.

Job openings climb to fresh high in March as record number of Americans quit their job
About 3% of the workforce quit their jobs in March

https://www.foxbusiness.com/economy/march-job-openings-quit-rate-2022

(BOLD is my opinion OR what I consider important content)

"A record number of Americans quit their jobs in March, underscoring how persistent turmoil in the labor market has made it difficult for employers to fill open positions.

The Labor Department said Tuesday that 4.5 million Americans, or about 3% of the workforce, quit their jobs in March. That's up from 4.4 million in February and just slightly tops the previous record notched in November. By comparison, pre-pandemic levels typically hovered around 3.6 million.

Meanwhile, the number of job openings rose to 11.5 million by the end of March.

The data emphasizes how newly empowered workers are quitting their jobs in favor of better wages, working conditions and hours as businesses lure new workers with higher salaries – a new trend dubbed the "Great Resignation." As a result, Americans' incomes are rising across the board as employers have ramped up hiring to offset the losses."

MY COMMENT

I am looking forward to when I can say we have recovered from the shut-down. Unfortunately it is happening very slowly. So as usual.....I will say we have at least another 12-18 months to get back to whatever "normal" is going to be.

 

As I sit here and type.....looking up at the TV once in a while......the markets continue to bounce around. Now we are positive except for the NASDAQ.

I dont see or "feel" much real direction. The end of the day will be a surprise.

 

YES......the mid morning move is happening right now. We are seeing a nice.....BIG...... jump up in all the averages. Lets hope this is now confirmation of the direction that the markets are going to take today.

 

For young or new investors.....it pays to learn the lesson that short term money should not be in the markets. Yes.....it is a pain to see the markets booming while you have some big chunk of cash siting outside the markets waiting for some short term use. But the alternative......getting caught up in a short term nasty downturn.....is worse.

Relying on stocks for a near-term purchase? What to consider as the market gyrates

https://www.cnbc.com/2022/05/03/nee...purchase-what-to-consider-as-they-tumble.html

(BOLD is my opinion OR what I consider important content)

"Key Points

• Until recently, a soaring market led many investors to consider using stocks to fund major purchases like a home or college tuition, according to financial advisors.
• The market’s plunge so far in 2022 leaves them with few good options.
• High inflation and rising interest rates also pose problems for traditionally safer asset classes like cash and bonds.

When stocks gyrate, stock investors invariably hear this advice: “Stay the course.”

In other words, don’t sell in a gut reaction; stick to your financial plan. This counsel generally makes sense for long-term investors. Stocks are likely to recoup losses by the time owners need the money many years or decades from now.

But the calculus is different for someone depending on stocks to help fund a near-term purchase. That may include buying a home or paying for a child’s college education sometime in the next year to 18 months.

Firstly, this strategy is often unwise — it’s like gambling with money you can’t afford to put at risk. However, it’s one many investors weighed as stocks continued to soar until recently, according to financial advisors.

The risk has been thrown into stark relief in 2022, though. The Dow Jones Industrial Average and S&P 500 stock indices are coming off their worst month since early pandemic woes in March 2020. The S&P 500 is down about 13% this year.

“This is the first lesson for most investors: Money you need for short-term goals just doesn’t belong in the stock market,” according to Ted Jenkin, a certified financial planner and co-founder of oXYGen Financial in Atlanta.

Money earmarked for a major purchase in months’ time should generally be in something more conservative, meaning it’s insulated from market whiplash, according to financial advisors.

“We always say, ‘Are you comfortable if that $100,000 turns into $60,000 right at the time you need to write that [tuition] check?‘” according to Lee Baker, CFP, founder of Apex Financial Services in Atlanta. “The answer is always ‘no.’”

Unfortunately, investors caught off guard by the market’s plunge in 2022 don’t have many good options.

Yes, it’s possible stocks will rebound by the time you need the money.

However, the war in Ukraine and the Federal Reserve’s renewed cycle of raising interest rates may prolong the recent pain — or make it worse.

The better bet is to pull the money from stocks that you’ll need and park it in something safer, even if it means inking a loss, advisors said.

“You made that decision [to invest in stocks],” Baker said. “You’ve got to suck it up.”

There may be one minor consolation, Baker said: tax-loss harvesting. (This applies to investors who own stocks or stock funds in a taxable brokerage account.) This tax play lets investors use an investment loss to offset a capital gain elsewhere in their portfolio.

Investors can also consider taking a short-term loan to cover college tuition for the first semester, for example, to give stocks some time to rebound, Baker said. But this also carries risk — namely, you’re still on the hook for the loan even if the market doesn’t recover as fast as anticipated.

But parking money in cash is a better option for short-term funds than stocks, advisors said.

There are ways some investors might be able to eke out a slightly higher return, too.

I bonds, for example, are a nearly risk-free asset paying a guaranteed 9.62% through October 2022.

However, there are caveats: There’s a $10,000 purchase limit. You also can’t touch the money for a year, meaning I bonds aren’t for investors who need the funds in a few months. (There’s also an interest penalty for someone who cashes out within five years, but the record-high rate means investors would still get a good return even with that penalty, Jenkin said.)

Investors can also consider short-term treasury inflation-protected securities, which offer some insulation from inflation and rising interest rates, Jenkin said. (He recommends the Vanguard Treasury Inflation Protected Fund [VTIP] or something similar.)

They may also consider floating-rate bond funds, he said. (However, these types of funds generally carry more risk than others like U.S. Treasury funds.)

“We’re just in one of those markets right now where it’s really hard to make money on short-term cash,” Jenkin said."

MY COMMENT

It drives me crazy when I have to leave money as cash.....but......I bite the bullet and do it. It is simply a matter of financial DISCIPLINE. I NEVER leave short term money in the markets. When I was living from personal assets before my annuities......I tried to keep at least 3 years of living money outside the markets. I would usually ladder the money in CD's so that I could make something with absolute safety.

Much of investing is simply the same thing......DISCIPLINE. Once you figure out how to make money in the market over the long term it is simply a question of having the DISCIPLINE to do the same things over and over and over. It is a question of PROBABILITY and having the discipline to do the little things that skew the probability to your side of the ledger. Over time the benefits add up to long term gains and compounding.

 

I have no idea Emmett.......I am too old.

 

GLAD to see the markets in the green today.....even though I did not participate in the gains. I ended with a small loss today and got beat by the SP500 by 0.71%. I ended with five stocks up and five stocks down. NIKE was my worst one that pulled me into the red today.

Of well......that is what happens sometimes when you hold a small number of stocks. I am just happy that we have now done TWO days in a row in the green.

 

Here is how we ended in the GREEN today....two days in a row. Tomorrow is......GASP.......FED day.

Stock market news live updates: Stocks post back-to-back sessions of gains as traders await Fed

https://finance.yahoo.com/news/stock-market-news-live-updates-may-3-2022-221836680.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks rose for a second straight day on Tuesday, as investors appraised the next moves by the Federal Reserve and a fresh batch of quarterly earnings results.

The S&P 500, Dow and Nasdaq ended higher after struggling for direction intraday. The S&P 500 gained 0.5% to close at 4,175.48, while the Dow rose by 67 points, or 0.2%, to close at 33,128.79. The Nasdaq gained another 0.2%, building on the index's 1.6% rise a day earlier.

The market moves at the start of this week extended the streak of volatile trading investors have endured over the past several weeks. The S&P 500 posted an 8.8% decline in April for its worst month since March 2020.

"Volatility skews in both directions. In this period when we expect heightened volatility because of all of the confluence of factors that we see from geopolitics to earnings to the Fed to inflation, you're going to have big swings like this," Ross Mayfield, Baird investment strategy analyst, told Yahoo Finance Live. "I think at a certain point, buyers do see some value in there. If you're of the opinion that we're not going to enter a recession ... I think you start to see some value investors start to take some bites."

Still, given the variety of concerns still present for the market outlook, many strategists have struck a more cautious tone on U.S. stocks for the near-term. In a note published Friday, Bank of America strategists led by Savita Subramanian slashed their price target on the S&P 500 by 100 points to 4,500.

"This year's market does not appear to be dominated by one factor, be it fundamentals or positioning, cost of capital or corporate outlooks, but has been reacting to all of the above in big swings," the analysts wrote.

And this week, investors are bracing for the Federal Reserve's latest monetary policy decision, which is set to include measures intended to accelerate the central bank's fight to bring down elevated inflation, even at the expense of some economic growth. Investors are looking for the Fed to raise rates by 50 basis points for the first time since 2000, and to officially announce the timing of the start of quantitative tightening, or the rolling of assets off the Fed's $9 trillion balance sheet.

"There's no doubt that there's some anticipation out there of [Fed officials'] comments and their action," Katie Stockton, Fairlead Strategies founder, told Yahoo Finance Live. "We're seeing that in the marketplace. It's very, very skittish, and probably reasonably so."

"I think we all kind of know what's coming. And yet sometimes that doesn't matter. Sometimes the market comes into it and it can be deeply oversold," she added. "I think it's a pretty risky assumption to make in this kind of environment ... I mean there's hardly any stocks that have been unturned by the recent weakness. So I think we have to keep those risks in mind as we come into the numbers."

10:12 a.m. ET: Job openings race to a record high of more than 11.5 million in March

U.S. job openings rose to a record level in March, with labor demand still outpacing supply across many firms throughout the country.

Job openings increased to 11.549 million in March, the Labor Department said in its Job Openings and Labor Turnover Summary (JOLTS) on Tuesday. Job openings had totaled 11.344 million in February, according to the revised monthly print. Consensus economists were looking for job openings to decline to 11.200 million for March, according to Bloomberg data.

The number of vacancies across the U.S. economy has far outpaced the number of hires, which were little changed month-on-month at 6.7 million in March. And the number of quits also edged up to a record high of 4.5 million, with the quits rate hovering little changed at 3.0%."

MY COMMENT

Not much going on in the news today......other than the FED......which was totally overshadowed by the COURT news that the markets did not care about.

There is ZERO doubt what the FED is going to do.

 

EMMETT.

It would be fun to attend all the various sessions and compare them. Are the instructors the same or do they match the group? Is the material the same. Are the products talked about the same? Are the strategies the same? Does any group get any sort of better deal on products or advice or education? Etc, etc, etc.

If everything is not the same to each group....why not? And.......if not the same.....how and why was it decided to present different materials or info to different groups?

In any event......however they do it......it is good to try to give employees some financial education and information.

 

LOL.....you beat me to it TireSmoke. I saw that AMD was up by 6% and came on to put up a post aimed at you. BUT.....you beat me to it with your post above.

This should give you a nice jump up with your concentrated chip portfolio.

I agree with what you said.....NVIDIA is the leader of thsi group and they are one of those companies that I think have GREAT MANAGEMENT.

Yes.....the interest rate BS and other excuses for the short term day to day market action are......just that.......lazy, media, excuses.

 

I agree Zukodany. I dont see the economy in tatters. At least here in my area the economy is BOOMING. But at the same time, the markets are significantly down for the past 4 months and look like they will go down some more over the next few months or perhaps even longer. I am saying another 5-10% is "possible".

In fact if I was a market timer......siting on cash.....I would probably be re-entering the market this month. If I was a ......timer.....I would be willing to take a "possible" hit of 5-10% to get back in within that range of the bottom. It is impossible to time a bottom and I would be willing to take a risk of 5-10% at this point.

We are struggling to normalize after the shut-down. I thought we would be pretty much back to normal by now.

Earnings have not been bad......perhaps.....a little low.....but not bad. Much of the critical commentary on earnings has been the usual media stuff and the short term reaction to guidance.

Unfortunately.....we have a long history of the FED driving the country into recession when they start to try to manipulate and guide the economy. Add in the total lack of confidence in the government and their ability and you have the current markets.

We are also in a little time period where the short term.....BIG.....micro-second traders are able to (legally) play their games and manipulate the news coverage and other items to drive their trading. They do well when the public and the media are all caught up in DRAMA.